Caterpillar shares jump as profit climbs 13%

Construction giant stands by 2008 forecast, despite weak U.S. demand

SteveGelsi

SAN FRANCISCO (MarketWatch) - Caterpillar Inc. shares jumped more than 8% Friday after the bulldozer giant reported a double-digit jump in first-quarter profit on the back of strong demand outside its "depressed" home market.

Caterpillar
CAT, -0.77%
also stuck to its forecast for 5% to 15% growth in earnings per share in 2008, despite further weakening in North America.

"Even though we're currently weathering a recessionary storm in the United States, we expect the rest of the world to continue to invest in infrastructure growth well into the next decade," Chairman and CEO Jim Owens said in a statement.

The stock, a component of the Dow Jones Industrial Average
DJIA, +0.72%
surged $6.69 to close at $85.28, helping the broader market to a big rally to end the week. See full story.

Caterpillar shares have risen more than 17% since the beginning of the year.

The Peoria, Ill. heavy construction manufacturer said earnings for the three months ended March 31 increased to $922 million, or $1.45 a share, from $816 million, or $1.23 a share in the year-ago period.

Revenue rose to $11.8 billion from $10 billion.

Analysts polled by FactSet Research were looking for a profit, on average, of $1.34 a share on revenue of $10.06 billion.

"Even though North America, our largest geographic market, is depressed, we are investing for growth," Chairman and CEO Jim Owens said. "We are significantly increasing capital expenditures for improved productivity and higher capacity, and our research and development is focused on sustainability and innovative new products."

Caterpillar said it continues to see strong demand for products used in the global mining and energy industries and for machines used by our customers to build infrastructure, particularly in emerging markets, like China.

The company also noted that its financial products business turned in its best first quarter ever for revenues and profit, despite credit market challenges.

"Our long standing and consistent credit practices have served us well," Owens said.

Caterpillar's worldwide employment was 102,623 in first quarter 2008, up 7,289 from 95,334 in first quarter 2007. Of the increase, approximately 3,000 were the result of acquisitions. The remaining increase of approximately 4,300 employees primarily supported increased volumes, growth and new product introductions.

Larry De Maria, analyst at Sterne, Agee & Leech in New York, reiterated his hold rating on the stock and raised his price target to $77 a share. Still, he remained cautious on his outlook through 2009 due to commercial construction woes in North America.

"We believe that 2010 could be an excellent year ... should emerging markets continue to be strong, North America rebounds and operational improvements materialize," he said in a note to clients. "However, it is far too early to bet on."

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